High Yield Zero Deposit Leasebacks That Pay your Mortgage

By: Nick Dowlatshahi

For many investors buying leaseback property in France the key attractions are the guaranteed yields, stable economy, low deposits and low interest rates. For most leasebacks though even if you managed to get 100% finance for the ex VAT price you still have had to find the VAT as your deposit which you do not get back until 3-6 months after completion. This can often slow down an investor's momentum as they are waiting to receive back the VAT before using that money as the deposit for their next investment. Because off-plan properties are usually released for sale 18 months to 2 years before completion you could be waiting over 2 years to get your VAT deposit back.

The next thing people often have trouble with is finding 100% interest only mortgages as up till now really only 80% has been possible. Investors often like the idea of interest only mortgages as it reduces their monthly mortgage payments and therefore improves their cash-flow. However interest rates for interest only products have up till now been rather uncompetitive with the classic "interest and capital" mortgage interest rates which have put people off taking them.

The third thing that for some investors has prevented them from taking the plunge and investing in France is that they have felt the yields are not high enough on leasebacks which have usually been around 4-5% NET (equivalent to around 6-7% gross). Even though they are guaranteed and paid NET some investors prefer to take the gamble and purchase something in the emerging markets that they "think" will have a higher rental return.

These issues have now been overcome and you can now get the ultimate leaseback investment. Let's take an example of one to three bedroom apartments from 106,917 Euros in a stunning high quality residence at Mers Les Bains, Picardy, just 300m from the sea and right in the town centre, walking distance from all amenities. The guaranteed NET yield is 5.27% and you can secure 100% interest only finance (subject to status) at a fixed rate of just 5.1% (correct at time of writing).

What this means is that you can invest in and excellent location in France that pays for itself and all you need to find are your bank and mortgage setup fees plus your legal fees (notaire fees). If you add all these together they add up to roughly 7% of the property price. For better understanding we have provided a simulation below of an investment in a 1 bedroom apartment:

Property Price: 106,917 Euros
VAT@ 19.6%: 20,956 Euros
Mortgage: 106,917 Euros

Deposit: 0 Euros
Notaire fees: 5115 Euros
Bank & mortgage fees:2302 Euros

TOTAL personal contribution: 7,417 Euros

This is just one of the highly attractive investments currently available in France and with the new French tax reforms great things are expected for French property in the coming years.

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